Report

Coal Tax Subsidies: A Boon for Kemper

Nov 15, 2016 | 4 min read | Print Article

A new report from Taxpayers for Common Sense (TCS) and Friends of the Earth (FOE) sounds the alarm on a lame duck tax deal that could send billions in subsidies to Southern Company’s long-troubled Kemper coal plant in De Kalb, Mississippi.

Originally projected to cost $2.4 billion and to come online in 2014. The price tag now stands at $6.9 billion —and after repeated delays, the latest placed in service date has been pushed to December 31, 2016.

Lawmakers in Washington are weighing a series of proposals that would extend and expand a tax credit for facilities that capture and store carbon dioxide. While this process, known as carbon capture and sequestration (CCS), has been sold as an environmentally friendly policy, it is expensive, unproven, and potentially dangerous. One CCS project that has received significant attention is Southern Company’s Kemper coal plant in De Kalb, Mississippi. No stranger to controversy, the project is already billions of dollars over budget and years behind schedule. If the tax credit is extended, Kemper could receive a windfall of between $695 million and $4.5 billion.

As Congress returns to work following the election, big polluters are working to extend and expand a tax credit for carbon capture and sequestration – or CCS – facilities like Kemper as part of a year-end tax deal. The result could be a massive windfall for Southern Company when Kemper finally comes online—hypothetically as soon as 31 December 2016.

“Squandering more tax dollars on carbon capture for coal plants like Kemper is just throwing good money after bad,” – Autumn Hanna, senior program director at TCS.

Background on Kemper:

Read the full report here.

Kemper is a coal facility under construction in De Kalb, Mississippi. Utility giant Southern Companydesigned the project to turn coal into a gas, burn the gas for electricity, and capture an estimated 65 percent of the associated carbon dioxide emissions through a process called carbon capture and sequestration (CCS). Once captured, the emissions will be piped to nearby oil fields and pumped underground to help stimulate production as part of a process called enhanced oil recovery (EOR).

The long-controversial project was originally projected to cost $2.4 billion and to come online in 2014, but the price tag now stands at $6.9 billion—and after repeated delays, the latest placed in service date has been pushed to December 31, 2016.

Background on the CCS tax credit:

The Emergency Economic Stabilization Act of 2008—better known as the Wall Street bailout – created one of the biggest tax breaks for CCS on the books. Known as 45Q, the provision allows power plants like Kemper and other industrial emitters to claim a tax credit for every ton of CO2 they capture. The credit is worth $20 per metric ton CO2 captured and stored underground and $10 if the CO2 is captured and used for EOR. Congress never intended the subsidy to be permanent, and timed it to expire after 75 million credits had been claimed—a benchmark expected as soon as 2019.

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